Not everyone can meet the bank's strict income verification criteria. For example those who are self-employed and small business owners lack the needed documentation to support their true annual income. As a result they have difficulty being approved for loans and mortgages. Mortgage lenders consequently have begun to offer stated income loan products to help these individuals get over this hurdle.
A stated income home equity line of credit is one where you do not have to provide documentation that supports how much you say you earn. They lender essentially takes your word for it. Upon approval you are able to borrow against the equity that you have built up in your home.
It is a common business objective to strive to keep taxable income as low as possible by deducting eligible expenses. This is at odds with lenders who like to see as big an income as possible. They more income the easier it is for the borrower to service their total debt. Stated income credit products solve this.
The banker does not request traditional documentation proving income. In its place they insist upon strong credit worthiness. The higher the FICO score the better. They put this criteria in place to offset the greater risk they are undertaking by not verifying income.
The interest rate is often a little higher as well. It is not drastically higher, but again the lender is taking on additional risk and prices the product accordingly. There may be additional fees as well.
Some lenders will have unique criteria for these loans such as how long the applicant needs to have been in business. Additionally some banks may impose limits on how much greater the new monthly payment may be compared to how it was before. The lender simply wants to make sure that all the areas they can verify, are as solid as possible.
You can meet with a broker or search online for a mortgage lender that offers stated income products. It is encouraging to know that the financial institutions are taking the unique needs of the small business owner seriously. You might just have to work a little to search them out.
A stated income home equity line of credit is one where you do not have to provide documentation that supports how much you say you earn. They lender essentially takes your word for it. Upon approval you are able to borrow against the equity that you have built up in your home.
It is a common business objective to strive to keep taxable income as low as possible by deducting eligible expenses. This is at odds with lenders who like to see as big an income as possible. They more income the easier it is for the borrower to service their total debt. Stated income credit products solve this.
The banker does not request traditional documentation proving income. In its place they insist upon strong credit worthiness. The higher the FICO score the better. They put this criteria in place to offset the greater risk they are undertaking by not verifying income.
The interest rate is often a little higher as well. It is not drastically higher, but again the lender is taking on additional risk and prices the product accordingly. There may be additional fees as well.
Some lenders will have unique criteria for these loans such as how long the applicant needs to have been in business. Additionally some banks may impose limits on how much greater the new monthly payment may be compared to how it was before. The lender simply wants to make sure that all the areas they can verify, are as solid as possible.
You can meet with a broker or search online for a mortgage lender that offers stated income products. It is encouraging to know that the financial institutions are taking the unique needs of the small business owner seriously. You might just have to work a little to search them out.
About the Author:
If you are self employed, get more information on the stated income equity line at Pat's mortgage blog.
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